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The growth of digital collections in Europe

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Global cashless payment volumes are set to increase by more than 80% from 2020 to 2025 and to almost triple by 2030, according to analysis by PwC.

Fund collection is digitising at pace

The trend in Europe is following in the footsteps of developments we can observe in Asia. Different market dynamics in geographies such as China, Hong Kong and Thailand had led consumers to seek out more diverse payment methods including an array of digital wallets. Whilst payers in Europe have relied for longer on traditional payment methods such as cards and direct debits, there is an unmistakeable diversification underway here too.

Our clients demand payment solutions which are faster, more transparent, less risky and more cost efficient. In Europe, cards are the most popular payment method, however digital wallets and Open Banking payments are rising in use.

The race has now begun amongst corporates to offer their customers the experience they increasingly expect. The most innovative corporates are aware that is a material competitive advantage that could be critical to survival. The need to offer customers the payment journey they demand is made more challenging since new payment methods are not replacing legacy ones but joining them on the list that discerning consumers expect. This is creating challenges for cash management and treasury teams not only to integrate diverse collection methods into their front end POS and e-commerce checkouts but also reconcile increasingly eclectic reporting that often accompany each receivables instrument.

 

Peter Crawley

Our solutions enable clients to embrace digital transformation, with the ultimate goal of increasing their competitiveness, growing their sales and driving efficiencies within their business.

Peter Crawley | HSBC’s European Head of Global Liquidity and Cash Management

‘Omni Collect’, a digital fund collection proposition we have offered for some years in more than a dozen markets across Asia and used already by over 3,000 clients, in Europe with our 2022 launch in the UK. Omni Collect simplifies the way businesses collect digital payments for goods and services allowing them to easily adapt to changes in consumer spending. Our solution which incorporates AI technology affords corporates a comprehensive view of their payment collections across different channels, ranging from conventional to digital payment methods. Moreover, our Omni Collect Dashboard helps our clients make informed business decisions as well as process refunds efficiently, hence boosting working capital and enhancing their own customers’ experience.

As the diversification of fund collection methods has spread westwards, models have taken on their own distinct European flavour. Open Banking in Europe is opening up new opportunities to offer convenient online payment methods to customers. HSBC’s Open Payments Pay by bank account solution allows corporates in the UK and upcoming to launch in European markets to collect from their consumers on real time payment rails and thereby migrate away from percentage based card interchange fees.

 

Marco Hughes

By allowing real time payments to be combined with convenience for the payer and instant confirmation of payment initiation for the beneficiary, Open Banking is a powerful framework on which to build seamless digital fund collection solutions.

Marco Hughes | Europe Regional Head of Payments Products

HSBC Open Payments allows payers to initiate a pre-populated payment request from their online bank account and accept the payment to be made to the beneficiary via open banking API technology. The payers will then be automatically redirected to their own bank’s webpage or app to authenticate themselves and approve the payment details. HSBC Open Payments enables clients to improve their working capital, reduce the risk of fraud, lower the payment cost and improve their customer’s experience.

HSBC’s treasury APIs go hand in hand with HSBC Open Payments to track the payment status from initiation to completion, either from within HSBC or the receiving bank.

As real time payments play an ever more important role in the European payments ecosystem, notably thanks to the increasing use of SCT Inst in the region, the future of open banking solutions in the region is promising. SCT Inst already account for over 10% of all SEPA transactions in the region with the numbers clearly ascending.

Omni Collect and Open Payments are another arrow in a treasurer’s already bulging quiver to automate and accelerate receivables reconciliation. In the B2B world too, treasurers enjoy a range of options to optimise their domestic and cross border receivables including real time transactional reporting via API and virtual accounts.

Further on down the road

As real time payments take their place amongst the well embedded tools of any cash manager, new technologies are emerging on the horizon. Request to Pay in the UK and Europe, for instance, is gaining attention across the region as a framework with the potential to enhance customer experience and reduce costs in the fund collection journey.

Even further in the future, digital currencies are setting out their stall. Whilst speculation still reigns on potential use cases in cash management, it’s clear that they hold much potential.

CBDCs (Central Bank Digital Currencies) could help to spur further economic growth by making payments and settlements more efficient and cheaper, according to HSBC’s CEO, Noel Quinn.

As one of the world’s largest financial institutions, with deep experience of cross-border payments and foreign exchange markets, HSBC will continue to be involved in discussing and developing CBDCs. We are already working in partnership with many central banks, including those in the UK, France, Canada, Singapore, mainland China, Hong Kong, Thailand and the UAE, as they each consider how CBDCs can best work for them.

It should be noted, though, that if stablecoins and cryptocurrencies are to become relied upon in the same way, they will also require regulation that is commensurate with the risks they create. Even then, only designs that are sufficiently well anchored to achieve price stability, and correspond with current approaches to financial crime prevention, are likely to be useful as a reliable and safe means of payment.

Act now

This is a rapidly evolving space in which the prudent stay connected with developments. It’s therefore important to engage with banking and financial partners, other functions within the company (including those with direct customer contact) and treasury peers.

Use these conversations to begin establishing what technology has most relevance for your company. Think about how it can remove inefficiencies, and help end-customers do business with you. But do it with a business-oriented view because, ultimately, you need to make your firm more competitive now, and in the future.

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